Valuation of a Demolition Business – Family Purchase

BF Valuations Diamond LogoWe were engage to value a Demolition Business that was being sold within the family.  The parents had decided it was time to retire and pass on fair share to the son and his family and our role was to assess fair market value of the business to allow the transaction to take place.  The client appointed an independent expert valuer in the event the transaction was ever called in to question, that they could show and prove they sort independent advice into the relation to the market worth of the business.

This business was a difficult one as there are not many records of demolition businesses sold.  Like most industries demolition businesses come in many different forms including, size, procedures and clientele, therefore comparing these businesses was a difficult process. 

The business had been established for a very long time, and in recent years had shown considerable growth.  On our investigation it was evident that this growth was to continue both as and industry and the business itself.  The business had also invested heavily in their own plant and equipment thus any new owner of this business could be rest assured that they would not face any large capital outlay on the repair and maintenance of plant and equipment.

Upon reviewing and adjusting the financials it was evident that the past four financial year EBITDA figures were very consistent.  Thus it was decided to use that consistent EBITDA figure and apply a capitalisation rate based on a risk return anaylsis and compatible sales data.  

Due to the size of the plant and equipment in the business very little goodwill remained in the final figure of the going concern.  This was common in all recent sales of demolition businesses assessed.  This is not a reflection on the business itself rather the hesitant nature of the market.